MUMBAI: A flood of offers for sale (OFS) worth 13,500 crore by listed private and state-owned companies in the next few weeks could throw a spoke in any likely stock market rally over the short term.

Promoters of 70-odd private companies have to sell at least 25% of their equity capital, or shares worth Rs 9,500 crore, to the public over just three days through June 3 to meet the minimum public shareholding norm laid out by capital market regulator Securities and Exchange Board of India.

While six private companies came out with their OFS on Wednesday, at least nine have lined up theirs on Thursday. Money managers say this deluge of OFS is likely to cap any upside for the markets in the near term. Apart from private companies, for whom the deadline is around the corner, listed PSU companies have to divest stocks worth Rs 4,000 crore by August 8.

"The upside for markets is capped, as the current liquidity is likely to be sucked out by the deluge of OFS till June 3, which is the Sebi deadline to meet the public float norms," said Alex K Mathews, head of research at Geojit BNP Paribas Financial Services.

Foreign investors have pumped in $14.75 billion (Rs 81,000 crore) so far this year. But the benchmark index, BSE Sensex, has moved up only 3.75% during the same period. Analysts said a significant chunk of FII flows had been absorbed by previous offers for sale, and this trend would continue over the next few trading sessions.

"PSUs are required to divest about Rs 4,000 crore before August 8 to meet the 10% public float norms. A major chunk of divestment is expected in metal companies such as MMTC, Neyveli Lignite, and Hindustan Copper. The OFS announcements of these companies could add pressure on the broader market," said Nischal Maheshwari, head of research at Edelweiss.

All the offers on Wednesday succeeded with Sun TV's Rs 327.98-crore offer oversubscribed 3.17 times. Jaypee Infratech's Rs 562.08-crore offer was oversubscribed 1.43 times; the stock price crashed 10% to Rs 35.75 due to the 10% discount in the OFS.

Brokerages estimate that papers worth Rs 13,500 crore are likely to hit the market over the next couple of months, and this could lead to a correction in the respective stocks of companies lining up the OFSs.

Monnet Project, Sharp India, Aunde India, and IO System also had their offers for sale (OFS) on Tuesday. Some brokers said foreign institutional investors have turned choosy, looking for better-managed companies using the OFS route to cut promoter stake. The offers of Oracle and Astra Zeneca were subscribed by 4 -5 times. All the recent offers for sale have been fully subscribed.

"We have actively participated in the OFS by companies, but only in those offers where we feel that the fundamentals are strong and the offerings by the promoters have been at reasonable price," said Sunil Singhania, head of equities at Reliance Mutual Fund, which manages about Rs 95,000 crore.

"In good quality papers, we have seen strong appetite. But the response has been weak to offers of companies with poor fundaments," said Navneet Munot, chief investment officer at SBI Mutual Fund.

In June 2010, the Union ministry of finance had issued guidelines pertaining to minimum public shareholding for all listed corporates. The guidelines were later revised in August 2010. Thus, corporates got three chances to meet the norms.